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. e du/thir dc ir c uit_1996/51UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

___________

No. 96-7089

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GRAPHIC COMMUNICATIONS INTERNATIONAL UNION, LOCAL 735-S,

Appellant

vs.

NORTH AMERICAN DIRECTORY CORPORATION II

___________

Appeal from the United States District Co urt for the Middle District of Pennsylvani a (D.C. Civ. No. 93-cv-01991)

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Argued August 6, 1996 Before: MANSMANN, SCIRICA and WEIS, Circuit Judges.

(Filed October 17, 1996)

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Ira H. Weinstock, Esquire Jason M. Weinstock, Esquire (ARGUED) Ira H. Weinstock, P.C.

800 North 2nd Street
Suite 100 Harrisburg, PA 17102

COUNSEL FOR APPELLANT

Steven R. Semler, Esquire (ARGUED)
Semler & Pritzker 5301 Wisconsin Avenue, N.W.
Suite 610 Washington, D.C. 20015

COUNSEL FOR APPELLEE

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OPINION OF THE COURT

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MANSMANN, Circuit Judge. Today we determine if the normally favored "presumptionof arbitrability," in section 301 labor relation ca ses, has been

overcome by language in a collective bargaining agr eement circumscribing the jurisdiction of a dispute resolu tion body. Here the union filed a grievance before the Peer Re view Panel
over the extent of health insurance benefits. Because we find that the union, in essence , seeks to have the Peer Review Panel effectuate a change in b enefits, a matter expressly reserved from its jurisdiction in the collective bargaining agreement, we will affirm the judgment o f the district court entered in favor of the company.

I. North American Directory Corporation II, ( "NADCO"), produces telephone directories. At the time of thi s litigation, its Hazelton, Pennsylvania, plant employed approxim ately 200 production and maintenance employees who were repre sented by Local 735-S of the Graphic Communications Internati onal Union.
NADCO and the union entered into a collect ive bargaining agreement effective December 1, 1992 to November 30, 1995. During the negotiation period, the concept o f "peer review" was introduced by NADCO as an alternative t o the traditional arbitration system. Under this peer re view system, employee grievances are brought before a 5-person p anel dominated by non-managerial members (3 employees/2 management ). Despite some initial skepticism, the union agreed to accept the Peer Review Panel as the decision maker in certain workp lace
situations. The description of the Peer Review Panel p rocess at NADCO is found in Article 26 of the parties' collec tive bargaining agreement. The procedure for the filing of grievances, abbreviated for our purposes, is as fol lows: Article 26.1 A grievance is defined and r estricted to an allegation that the employer has violat ed a specific provision of the collective bargaining agr eement. A grievance as defined herein, shall be proc essed as

follows:

STEP 1: A grievance shall be brought to t he attention of the grievant's supervisor wit hin five (5) working days of the act or omissi on being grieved . . . . The supervisor must answer the grievance within three (3) work ing days of the presentation.

STEP 2: If agreement is not reached at th e Step 1 discussion, the grievant shall have three (3) working days thereafter in which to file a written grievance with his/her department head (or designated Company representative) . . . . The department he ad (or designated Company representative) mus t answer the grievance in writing within fiv e (5) working days of its presentation or an y meeting.STEP 3: If the grievance is not settled a t

Step 2, the grievant shall have three (3) working days from receipt of the Step 2 answer in which to appeal the Step 2 decis ion in writing, by submitting the grievance to 1) a Peer Review Panel, or 2) the Plant Manag er (Senior Management), whose decision(s) wil l be final and binding on the grievant, management and the Union. . . . The Peer Review Panel or Plant Manager shall have f ive (5) working days after meeting in which to answer the grievance in writing.

* * *

The Panel will not have the authority to render a decision which will add to, subtr act from, or change the meaning of specific provisions of the contract; nor shall the Panel have any authority to change Company or plant policy, pay rates, benefits, work ru les
or to determine future contract terms.

Details of the peer review procedure were finalized by a joint committee of union members and NADCO manage ment and were incorporated into the collective bargaining agreeme nt. The addendum reads in relevant part:

INTRODUCTION:

The company and the union recognize that f rom time to time an associate may encounter a problem, question or complaint that, if le ft unresolved, could affect job satisfaction and work performance. . . .

* * *

[W]hen an associate is faced with a situat ion that has not been satisfactorily resolved by traditional means, the PEER REVIEW procedu re may be used. Peer Review is a formal prob lem solving system designed to ensure that eac h associate's concerns are given careful
consideration and conflicts are resolved quickly and fairly.

SCOPE OF AUTHORITY:

A Peer Review Panel will hear grievances t hat have not been resolved at an earlier step of the Grievance Procedure. In other words, peer panels may review management's action s to ensure that the application of thecontract was followed correctly and fairly

.

If they find otherwise, they have the authority to rectify the situation consist ent with contract provisions, company practice s and/or policies.

(Emphasis added.)

The Peer Review Panel can not change contr act provisions, company policy, work rules, wa ge scales, or benefits. When a promotion is grieved, the panel can determine whether o r not the job was filled in accordance with
Article 16.0 of the contract. If the Peer Review panel decides it was not done properly, the panel can require the proces s be re-done in accordance with the contract

.

(Emphasis in original.) The addendum further delin eates the selection process for the members of the panel and describes the format of its meetings. The mechanics of the grievance procedure w ere invoked when a dispute arose under the provision of the col lective bargaining agreement which obligates NADCO to provi de health insurance coverage. Article 17.1 succinctly states : "NADCO will provide Health Insurance benefits, including dental , as described 12/22/92, subject to employee copay of 10% of preva iling premium
rate." No further written elucidation of the benef its exists and the parties join issue over the particulars of the agreed-upon

coverage. The parties do agree, however, that the in surance coverage changed under the new agreement. Facts no t in dispute are that, effective February 1, 1993, NADCO increas ed its payment of existing premiums from 85% to 90% and that the a nnual major medical deductible payments were increased from $10 0 to $200 per individual and from $200 to $400 per family. There is no such mutual understanding, however, concerning other cha nges to the package. Particularly, the union disputes its acce ptance of the portion of the insurance program which includes a d eductible and an employee across-the-board 20% copay of the first $2,000 in covered medical bills. Previously, with the except ion of major medical costs, employees had been afforded first do llar coverage (no deductible and no copay) for these expenses. Union members began complaining to their s upervisors regarding reduced coverages and voiced their concer ns that these changes were not bargained for in the new agreement . Their objections culminated in August 1993 by a written f iling of a Step 2 grievance. The union expressed its complain t as follows: The health plan currently in effect at NAD CO is not the plan we agreed to implement in negotiations which took place on 12/22/92. Our understanding was the plan we had was to remain the same except that the deductible would change from $100.00 single/$200.00family to $200.00 single/$400.00 family.

Also the copay of 15% would decrease 5% to 10% copay. We also agreed the carrier wou ld remain the same. (Blue Cross/Blue Shield of Northeast Pa. Wilkes-Barre) The Major Medical portion of the plan would be 80/20 of the next $2,000.00 dollars after the deductible is met. Instead we now pay 80/ 20 of all charges up to $2,000.00. . . . The coverage by Blue Shield has also changed. (ex. Surgical Services) The union then requested the following rel ief: Remedy: We want the same Blue Cross/Blue Shield plan provided by NADCO to it's [sic] employees as we understood it to be on 12/22/92. This pla n is the same plan the employees had prior to signing th e contract with the following exceptions:

1. $200.00 single/$400.00 family

2. Copay at 10%

This plan will be provided by Blue Cross/B lue Shield of Northeast Pa. Wilkes-Barre, Pa. Also, All employees who had to use the oth er plan will be reimbursed for any payment th ey may have made that should have been covere d.

NADCO rejected the grievance, citing two r easons -- one procedural, that the grievance was untimely filed, and one substantive, that the benefits provided are the ben efits as bargained for and agreed upon. The denial further stated: Finally, while we expect the above explanation will amicably resolve this grievance, I want to point your attention to Step 4 of the Grievance Procedure, which, among other things, precludes the peer rev iew mechanism from changing benefits.

By this language NADCO implicitly precluded appeal to the Step 3 level, the convocation of the Peer Review Panel. Following this denial, the union filed a c omplaint in
the district court under Section 301 of the Labor R elations Management Act of 1947, as amended, 29 U.S.C. § 185 , to compel NADCO to accept the grievance for peer review adjud ication. After discovery, both parties filed motions for sum mary judgment. The district court granted NADCO's motion, holding that the union grievance sought to impose a change in th e health insurance benefits, a matter strictly precluded fro m the jurisdiction of the Peer Review Panel: "The [colle ctive bargaining agreement] limitation is expansive and u nambiguous -- a peer review panel cannot reach a decision that re quires the Company to provide benefits different from those be nefits which the Company believes it is obligated to pay under t he CBA."Graphic Communications International Union, Local 7 35-S v. North

American Directory Corporation II, No. 93-CV-1991, slip op. at 12 (M.D. Pa. filed Jan. 12, 1996). The union filed a timely appeal.

II. The dispositive issue is whether adjudicat ion of the union's grievance falls within the jurisdictional p urview of the
Peer Review Panel. We recognize initially that the question o f whether the union's grievance is arbitrable is one for the cour t to decide. AT&T Technologies Inc. v. Communication Workers of America, 475 U.S. 643, 649 (1986). Second, we acknowledge the g eneral presumption favoring arbitrability of labor matters . The Supreme Court's decisions in the Steelworkers Trilogy firml y established these principles and AT&T Technologies revalidated arbitration's special status: [W]here the contract contains an arbitrati on clause, there is a presumption of arbitrability in the sense that "[a]n orde r to arbitrate the particular grievance shou ld not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. Doubts should be resolved in fav or of coverage." Warrior & Gulf, 363 U.S. 58 2- 83. . . . "In the absence of any express provision excluding a particular grievance from arbitration, we think only the most forceful evidence of a purpose to exclude the claim from arbitration can prevail." Warr ior & Gulf, supra, at 584-85.

475 U.S. at 650. Finally, we refer to the Court's caution t hat since arbitration is a contractual matter, there must be agreement to submit the dispute to arbitration before the obliga tion arises. Id. at 649, citing John Wiley & Sons, Inc. v. Livin gston, 376 U.S. 543, 546-47 (1964). Of course, this deference is to be afford ed only when the grievance at issue is properly before the arbit ral body. As we noted, federal labor policy is well disposed tow ard congenial labor/management relations and will liberally apply contract law in favor of the existence of a collective bargainin g agreement. Ludens, 28 F.3d at 359. Yet it is essential that t he dispute falls within the purview of the arbitration clause. Trap Rock, 982 F.2d at 888. We thus turn immediately to the c ollective bargaining agreement. The language in the collective bargaining agreement before us allows generally for access to the grieva nce procedure where there is an allegation that the employer has violated a provision of the agreement. Because the union's pr esent grievance asserts that NADCO has not provided healt h insurancecoverage in conformity with Article 17.1, the compl aint facially

appears amendable to the Peer Review Panel process. We next inquire whether the parties intend ed, by either "express exclusion or other forceful evidence," AT& T Technologies, 475 U.S. at 652, to bar the Peer Revi ew Panel from resolving this dispute. By the terms of the contra ct, the Peer Review Panel is empowered to evaluate management ac tions. If it determines that management has not acted in conform ity with the collective bargaining agreement, the Panel is commi ssioned to rectify the problem in light of the contract and co mpany practices. Exclusionary language, however, confine s the decisionmaking role of the panel: it "can not chang e contract provisions, company policy, work rules, wage scales , or benefits." (Emphasis in original.) Here, the union's grievance presented to t he panel requested a direct remedy -- implementation of the medical insurance plan as the union understood it. Despite its demand, the union characterizes the grievance as requesting only an interpretation of the Article 17 description of the health care package. We note that the substance, not the phrasi ng, of the grievance governs its arbitrability. Morristown Da ily Record v. Graphics Communications Union, Local 8N, 832 F.2d 3 1, 34 (3d Cir. 1987). The union then asserts that the language l imiting the jurisdiction of the Panel serves to define its role as a "rights"
and not an "interest" arbitrator. In interest arbi tration, it is within the province of the decisionmaker to "set ne w terms and conditions of employment. . . ." Lodge 802, Intern ational Brotherhood of Boilermakers, Iron Shipbuilders, Bla cksmiths, Forgers and Helpers, AFL-CIO v. Pennsylvania Shippi ng Company, 835 F.2d 1045, 1046 (3d Cir. 1987). Rights arbitra tors, on the other hand, "resolve disputes involving the interpr etation or application of terms and conditions of employment." Id. at 1047. The asserted similarity to the rights arbi tration depicted in Lodge 802 does not exist here. In that case, there was a clear intent to establish a rights only arbit ration system. While the arbitrator was authorized to adjudicate d ifferences as to "meaning, application or interpretation of any t erms and conditions of this Agreement," he was specifically denied the "power to alter or modify" the terms and conditions of the collective bargaining agreement. Id. In the present dispute, the Peer Review Pa nel's authority is not couched in terms limiting its func tion to an interpretative one. Nor are its powers unfettered. Instead, a hybrid body has been established by the collective bargaining agreement. The Panel is authorized to review certa in management actions, and, when appropriate, dictate relief. Ha ving granted such license, however, the agreement then clearly r estrains it. Paramount to this case, the Peer Review Panel canno t change
benefits. The union's claim that it is seeking an in terpretation of the contract is belied by its request for a spec ific remedy calling for direct action. The present grievance c an only be understood as an attempt to effectuate a change in the medicalbenefits provided under the collective bargaining a greement, a

matter forbidden of consideration by the Peer Revie w Panel.
We have also considered the hollow result which would necessarily follow. If the Peer Review Panel decid ed that the health care package actually provided by NADCO was not that bargained for on 12/22/92, a change in benefits wou ld be mandated. The union does not, and could not, argue that any reading of its contract with NADCO permits such act ion be taken by the Panel. Such an outcome is not contemplated by the policy favoring arbitration or the basic integrity of the contract here. We therefore conclude that the presumption of arbitrability has been overcome by express exclusio n. A presumption, by its very definition, is an attitude dictated by probability. There is no need to presume anything here where the intent is expressly stated.

III.
We will affirm the order of the district c ourt awarding judgment to NADCO.

Graphic Communications International Union, Local 7 35-S v. North American Director Corporation II, No. 96-7089

___________________________________________________ ______________

WEIS, Circuit Judge, Dissenting. The majority carefully explains that the d ispute between the parties is limited to whether the phras e in the health benefits portion of the collective bargainin g agreement "as described 12/22/92" imposes increases in deduct ible and copayment provisions. The union asserts that the inc reases are not "as described 12/22/92," and the employer says they are. The disagreement then is straightforward and focuses on the meaning to be given the cryptic statement, "as described 12 /22/92." The union contends that the dispute is an appropriate subject for a grievance, defined by the collective bargaining agreement as "an allegation that the employer has v iolated a specific provision of the collective bargaining agr eement." According to the union, the employer's insistence t hat employees pay an increased deductible and co-payment for hosp ital and surgical expenses violates the health benefits prov ision in the collective bargaining agreement. Although it disagrees with the union's ver sion of what was "described 12/22/92," the employer sidesteps th at issue and, instead, maintains that the peer review panel, as t he final step of the grievance procedure, lacks the authority to resolve the issue. The employer points out that the collective bargaining agreement states: "The peer review panel can not c hange contract provisions, company policy, work rules, wage scales or benefits," and argues that the union seeks to "change" the ben efits provisions. In its brief, the employer makes it clear that, in itsview, "change" refers to the benefits that have "in disputably . .

. been in effect for six and one [half] months befo re the subject grievance was filed." Appellee Brief at 21. That statement is based on the facts that the collective bargaining a greement was signed on January 9, 1993, and, on February 1, 1993 , the employer began to impose the deductible and co-payment provi sions. Despite grumbling by employees beginning at that ti me, the union did not file a formal grievance until August 16, 19 93. When it attacks the peer review panel's au thority to "change" benefits, the employer focuses on those be nefits in existence at the time the grievance was filed -- no t necessarily those due under the collective bargaining agreement . The employer's contention is that its action in putting lesser benefits into effect sets the standard, which the p eer review panel may not "change." Assuming arguendo that the union's positio n on the understanding of 12/22/92 is correct and that the i ncreases in deductibles and co-payments were not included, it f ollows that using management's approach would result in denying the peer review panel the authority to remedy the employer's violation of the collective bargaining agreement. Adopting such an interpretation of the panel's authority makes the d escription of benefits in the collective bargaining agreement irr elevant when the employer unilaterally imposes a different healt h insurance program before the grievance occurs. Indeed, had the collective bargaining agre ement explicitly provided that no deductibles or co-payme nts would be applicable, under the employer's interpretation, th e peer review panel would still lack power to alter the benefits program implemented on February 1, 1993, even though the em ployer acted unilaterally. In sum, according to its view, the e mployer may circumvent peer review simply by adopting a new ben efit, wage scale or work rule despite collective bargaining pr ovisions to the contrary.
It seems to me that the district court mis apprehended the parties' positions when it stated that "the rem edy sought by the Union is to change benefits provided by the Com pany under the
terms of the CBA that went into effect on December 1, 1992." Actually, the union seeks to reinstate, not change, the benefits it says were provided by the collective bargaining agreement. Of course, the parties to a collective bar gaining agreement are free to adopt a wide range of methods for resolving disputes over contract interpretation, including a veto power. In this case, however, the employer did not retain the nullification right it now claims. The peer review procedure adopted by the p arties provides that "peer panels may review management's actions to ensure that the application of the contract was fol lowed correctly and fairly. If they find otherwise, they have the authority to rectify the situation consistent with contract provisions, company practices and/or policies." Th at section clearly sets out the provisions of the collective b argaining agreement as the basis for determining if managemen t's action's
are correct and fair.In deciding whether a ruling of a peer rev iew panel is

a "change," therefore, the point of reference is th e collective bargaining agreement -- not a practice instituted b y the employer after the agreement was adopted. The employer's in sistence that the peer review panel cannot act in the circumstanc es here is simply inconsistent with the provisions of the peer review
agreement. Even if there were a conflict or ambiguity between various provisions of the peer review agreement, th e Court is required to adopt an interpretation favoring the me ans of dispute resolution provided in the collective bargaining ag reement. "An order to arbitrate the particular grievance should not be denied unless it can be said with positive assurance that the arbitration clause is not susceptible of an interpr etation that covers the asserted dispute. Doubts should be reso lved in favor of coverage." United Steelworkers of America v. Wa rrior & Gulf Navigation Co., 363 U.S. 574, 582-83 (1960). See a lso 5 Theodore Kheel, Labor Law § 23.07[2] (1995) (presum ption of arbitrability compels arbitration even when parties do not clearly evidence a contractual intention to do so.) The employer's proposed construction of th e peer review panel's authority not only guts the dispute resolut ion procedure set up by the collective bargaining agreement, but is in conflict with basic tenets of labor law. When there are gap s in a contract, it is generally within the purview of the arbitrator to
resolve them. Price v. Internal Board of Teamsters , 457 F.2d 605, 610 (3d Cir. 1972). See also United Steelwork ers of America v. Lukens Steel Co., 969 F.2d 1468 (3d Cir. 1992) ( where collective bargaining agreement does not state who decides if grievance is valid, it is left to the arbitrator.). I would reverse the judgment of the distri ct court and remand with instructions to direct the parties to s ubmit the dispute for resolution by a peer review panel.